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Continental Concludes Schaeffler Investment Agreement

By Bearing Manufacturer>Bearing News>Continental Concludes Schaeffler Investment Agreement

Continental AG, Europe's second- largest tiremaker, accepted Schaeffler Group's takeover bid after the family-owned ball-bearings maker raised its offer to 75 euros ($110.60) a share. Continental's head Manfred Wennemer will leave the company.


Schaeffler increased the offer price from 70.12 euros, the lowest allowable under German law. Schaeffler will limit its position to a minority shareholding of up to 49.99 percent for a period of four years, Continental said in a statement on DGAP newswire this morning.


Continental became vulnerable to a takeover after last year's 11.4 billion-euro purchase of Siemens AG's VDO car- components unit added 9.5 billion euros to its debt and caused the share price to decline by more than 50 percent. Closely held Schaeffler made a formal offer on July 30, two weeks after announcing it controlled almost 36 percent of Continental, including 28 percent through swap rights.


``With this agreement, the dispute regarding the public takeover offer by the Frankish family owned business has been settled,'' Continental said in the statement. Former German Chancellor Gerhard Schroeder is guarantor of the agreement, which cannot be canceled before 2014.


Continental fell 11 cents, or 0.2 percent, to 73.49 euros in Frankfurt yesterday. The stock has dropped 19 percent in the last year, giving the company a market capitalization of 11.9 billion euros.


Wennemer to Leave


Continental's CEO Wennemer is to leave the company by Aug. 31, and a successor will be appointed in the ``immediate future,'' Continental said in separate statement.


Schaeffler, owned by billionaire widow Maria-Elisabeth Schaeffler, 66, and her son, is the world's second-biggest maker of Skateboard Bearings. The combined company would surpass Robert Bosch GmbH as the world's largest maker of automotive parts.


Continental is targeting sales this year of more than 26.4 billion euros, making it almost three times the size of Herzogenaurach, Germany-based Schaeffler. Continental's workforce totaled 149,113 employees as of June 30, a 67 percent increase from a year earlier. That compares with Schaeffler's 66,000 employees.


Schaeffler won't change Continental's incorporation, its corporate seat, headquarters or business divisions, its listing on the stock exchange, its dividend policy or increase its debt to equity ratio against its will.


Possible Effects


Schaeffler also promised to compensate Continental for possible negative effects resulting from a so called change-of-control in connection with existing financing agreements and negative tax effects resulting from Schaeffler's shareholding in the amount of about 522 million euros.


The companies will also look for strategic projects, particularly in the Powertrain division.


Following the VDO purchase, as well as the $1 billion acquisition of Motorola Inc.'s automotive-electronics unit in 2006, Continental's product line includes dashboard instruments, communications and navigation systems, vehicle-stability equipment and transmissions. Schaeffler ranks second to Gothenburg, Sweden-based SKF AB in making ball bearings.


Continental and Schaeffler have a 13-year-old joint venture to produce timing belts for cars. Volkswagen AG, Europe's biggest carmaker, is the largest customer of both manufacturers and has backed the merger.

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